Brothers, is the Nasdaq expensive right now or not? This question is hard to answer just by looking at how much it’s risen recently. A big rally doesn’t necessarily mean it’s all about inflated valuations; similarly, a drop doesn’t automatically mean it’s cheap. I prefer to break it down into two things: how much money companies can make, and how much the market is willing to pay for those profits. When stock prices go up, it could be one of two scenarios: profits are growing, and prices follow; or profits stay flat, but people are willing to pay higher valuations. Both look like gains in your account, but the underlying support is completely different. So when looking at the Nasdaq, aside from PE ratios, I also care about: - Have future earnings expectations been revised upward? - Is growth concentrated in just a few companies? - If earnings miss expectations, can current prices still hold up? Especially Forward PE, which uses projected future profits. A lower valuation might mean stock prices have dropped, or it could just mean analysts have raised their profit forecasts. Whether those expectations can be met will depend on upcoming earnings reports. Historical percentiles are the same. Being lower than a certain period in the past doesn’t necessarily mean it’s cheap; interest rates, industry structure, and growth expectations back then might have been completely different from now. And you can’t just cherry-pick a few years where “similar valuations led to big rallies” and treat them as next year’s playbook. For those who invest regularly, valuations are useful, but they’re better for reminding yourself to control your investment pace and position size—not for precisely predicting next week’s market moves. I also don’t want to ignore buying prices just because someone says “long-term bullish.” Even if company profits grow steadily, buying too expensive could mean valuation drops eat into some of your returns. Rather than rushing to label the Nasdaq as “cheap” or “a bubble,” I care more about: - Are profits keeping up with expectations? - How long can this money stay invested? - How much room is left if there’s a pullback? If you can think these things through, regular investing won’t just be about hitting the buy button every day.